In companies with an Employee Stock Ownership Plan (ESOP), the average worker has accumulated $134,000 in wealth from his or her stake, according to new research by professors Joseph Blasi and Douglas Kruse of the Institute for the Study of Employee Ownership and Profit Sharing at the Rutgers School of Management and Labor Relations.
Blasi and Kruse provided research and policy analysis during the drafting of the Main Street Employee Ownership Act, a bill that would make it easier for retiring business owners to sell to their employees through an ESOP or worker cooperative. With half the nation’s small businesses expected to change hands in the next decade due to the “Silver Tsunami” of retiring baby boomers, employee ownership is a succession plan that could save millions of jobs and prevent harm to local economies.
Sen. Kirsten Gillibrand (D-N.Y.) today announced the legislation (S.2786), which is co-sponsored by Sen. James Risch (R-Idaho), Chair of the Senate Committee on Small Business and Entrepreneurship; Sen. Ben Cardin (D-Md.), the Ranking Member; Sen. Cory Booker (D-N.J.); Sen. Susan Collins (R-Maine); Sen. Jeanne Shaheen (D-N.H.); and Sen. Todd Young (R- Ind.). The bill passed the U.S. House (H.R. 5236) with bipartisan support on May 1.
“The Main Street Employee Ownership Act will significantly expand the number of middle class citizens who have a shot at a meaningful financial ownership stake in the company where they work through an ESOP or a worker cooperative,” said Joseph Blasi, the J. Robert Beyster Distinguished Professor at the Rutgers School of Management and Labor Relations. “It will improve the ability of the Small Business Administration to be a full partner in developing employee share ownership in the economy through lending and technical assistance to facilitate the sale to the employees.”
Blasi and Kruse analyzed 40 years of U.S. Department of Labor filings as part of their research, which will be published at a later date. The dataset stretches from 1974, when Congress established the ESOP, through 2014. Key findings include:
- About 6,000 companies sold to their employees using an ESOP. Most were family businesses.
- Those companies were valued at $7 billion and employed about 2 million people as of 2014.
- The average worker in those companies had $134,000 in wealth from the stock.
- Workers who stayed with the company at least 20 years had significantly higher wealth buildup.
In an earlier study for the National Bureau of Economic Research, Blasi, Kruse, and Harvard professor Richard Freeman found that employee-owned companies tend to have higher productivity, lower employee turnover, and more commitment to the local economy. A book, co-authored by Kruse and University of Massachusetts Amherst associate professor Fidan Ana Kurtulus, also finds that employee ownership can help protect jobs during economic downturns.
“One of our most remarkable findings is that employee ownership companies had only half the layoffs of otherwise-similar companies in the last two recessions,” said Douglas Kruse, Distinguished Professor and J. Robert Beyster Faculty Fellow at the Rutgers School of Management and Labor Relations. “This means that employee ownership may help to stabilize communities and the larger economy by maintaining employment and consumer purchasing power.”
The Rutgers School of Management and Labor Relations (SMLR) is the world’s leading source of expertise on managing and representing workers, designing effective organizations, and building strong employment relationships.
The Institute for the Study of Employee Ownership and Profit Sharing at SMLR advances the understanding of capital shares through research, policy analysis, a competitive fellowship program, global conferences, undergraduate and graduate instruction, and a library of educational materials.
The New Jersey / New York Center for Employee Ownership, a branch of the Institute, assists local businesses exploring employee stock ownership plans, equity compensation, and worker cooperatives.
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